# Bollinger Bands By [mastercrypto](https://paragraph.com/@masterbrum.robots.farm) ยท 2023-01-29 --- Bollinger Bands are a technical analysis indicator used to measure volatility and provide a relative definition of high and low prices. The indicator consists of three bands, designed to encompass the majority of a security's price action: an N-period moving average (MA) in the center, and an upper and lower band that are two standard deviations away from the moving average. The standard deviations are used to calculate the width of the bands, which will adjust as volatility changes. The Bollinger Bands indicator was created by John Bollinger in the 1980s and is widely used by traders and investors to identify potential trends and reversal points. The basic interpretation of Bollinger Bands is that prices tend to remain within the upper and lower bands, and that a security is overbought when it touches the upper band and oversold when it touches the lower band. The following formula is used to calculate Bollinger Bands: Upper Band = N-period moving average + (N-period standard deviation \* 2) Lower Band = N-period moving average - (N-period standard deviation \* 2) Traders often use Bollinger Bands in combination with other indicators, such as the Relative Strength Index (RSI) or Moving Average Convergence Divergence (MACD), to confirm trends or reversal signals. Additionally, traders may look for price action near the upper or lower band as an opportunity to sell or buy, respectively. It is important to note that while Bollinger Bands can be a useful tool in technical analysis, they should not be used in isolation. Other factors, such as market fundamentals, should also be considered when making investment decisions. Additionally, Bollinger Bands can be subject to false signals, particularly during extended trends or when prices are subject to large gap moves. ![](https://storage.googleapis.com/papyrus_images/b47ef331b0f113f4970abd801621ab21e302c4964dd29f1c0cc4a8784092fcf9.png) --- *Originally published on [mastercrypto](https://paragraph.com/@masterbrum.robots.farm/bollinger-bands)*